Why is Ireland still a rip-off country?

Roscommon Independent TD, Luke “Ming” Flanagan was on Twitter bright-eyed-and-bushy-tailed this morning to say that he hoped to introduce a Competition Bill in 2013 and that he would raise competition and competition reforms with the bailout Troika when they pay us their next visit, which is understood to be next week. The regular audience on here will know that competition in Ireland is a bit of a bugbear on here – from consumer goods and services, food and mobile phones to, especially, professional services, law, medical, finance, receivers.

We’re a country with the worst deficit in the EuroZone, with 14.6% unemployment, with debt:GDP heading towards 125%, where commercial rents have declined 50% from peak, a flat economy in which living standards have dropped considerably and yet Dublin apparently still has the second most expensive lawyers in Europe after Moscow. The days of the €400-800 per hour accountant or receiver haven’t gone away, and for someone to cross the Border from Northern Ireland to the Republic, they are truly in for a shock with medical costs (Northern Ireland comparisons in brackets) – €100 if you turned up in Accident and Emergency (free), €50 for a visit to a public GP (free), and prescribed medicines can cost €100s (flat €8) and a suspiciously-high 80% (20%) of which just happen to be expensive non-generic drugs.

This blogpost examines the latest European survey of consumer price comparisons and contains exclusively obtained information from Eurostat on comparative European incomes – in summary, our household earnings are now 3.8% above the European average – compared with 6.6% above in 2009 – but our consumer prices are a whopping 18% ABOVE the European average – slightly down from 27% high recorded in 2008.

We all know the history : according to the CSO, the Consumer Price Index rose 37% in eight years from January 2000 to January 2008. Of course for many in the public and private sectors and on welfare, incomes kept pace over this period and for most, the increased prices weren’t a problem. Then , along came the crash in 2007/8 when property prices began to decline and problems in the banks revealed themselves. Household incomes subsequently fell as unemployment, elimination of overtime, cuts in gross salaries and welfare, and on the other hand, increased taxes, levies and contributions all ate into our incomes. Unfortunately prices have not declined in line with incomes, with the result of worse standards of living (for some).

It is notoriously difficult to fully compare price levels between countries – that’s probably why we ended up with the Big Mac Index – but despite the difficulties, the European statistics agency, Eurostat produces an annual snapshot of relative prices of consumer goods and services. This is the latest annual publication.

It shows that overall, for the particular basket of goods and services examined, Ireland’s prices are 17% above European Union – “EU27” to refer to the 27 members of the EU – average. That compares with our neighbours in the UK whose prices for the same basket are just 2% above the EU average. In 2010, our prices were 18% above the EU average and in 2008, the record-high year, they were 27% above.

When it comes to measuring income, we are by now familiar with the arguments in Ireland for ignoring GDP, it includes the profits of foreign companies which are frequently repatriated out of the country and consequently our GDP is artificially inflated. So we tend to prefer GNP but even that has issues and in any event, Eurostat don’t provide country comparison rankings by GNP, but Gross National Income or GNI is a close approximation to GNP, and on a household basis, we are now 3.8% above the EU27 Union average, down slightly from the 6.6%-above-average in 2009. But our nearest neighbours in the UK have healthier incomes, now 9.9% above the EU27 average.

So, compared with our neighbours, our incomes today are just 3.8% above average but our consumer costs are 17% above average; in the UK, their incomes are 9.9% above average and costs are just 2% above average. In a free market like Europe, why should this anomaly continue?

The answer is competition reform.

I’d love to know what the ranine Minister for Enterprise, Richard Bruton does all day – he gives the clear impression that his main pre-occupation when he turns up for work is to see if today is finally the day An Taoiseach Enda Kenny has a fatal slip on a political banana skin and Richard gets to fulfil his ambition of leading the Fine Gael party. Because, if you examine developments in enterprise, jobs or innovation in the past 20 months, there has been very little achievement, save for a litany of delay and disappointment and the odd goal-hanging appearance at a jobs announcement but the universal absence at redundancy announcements. And Minister Bruton is also the person most responsible for competitiveness issues and prices in the economy. So it is at his door that ultimately we can lay the blame for Ireland continuing to be a rip off economy which hasn’t adjusted to the painful reality following the property and banking collapse in 2007/8.

The Competition Authority is presently being merged with the National Consumer Agency, where our friend Ann FitzGerald was until recently the CEO. The Competition Authority is an agency for which Minister Bruton has responsibility. There is a desperate need for the Authority to aggressively tackle costs throughout the economy, and perhaps figuratively hang a few high profile bodies from lampposts to encourage an acceleration in reforms to competitiveness. Alas, Minister Bruton doesn’t seem very interested in such reforms.

So maybe some Opposition initiatives to promote competitiveness, like the Bill announced by Deputy Flanagan today, might spur this Government to tackle rip-off Ireland.

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a flat economy in which living standards have dropped considerably and yet Dublin apparently still has the second most expensive lawyers in Europe after Moscow.

Heh. It seems the more lawless your society, and the bigger the criminals in charge of the country, the more you have to pay the lawyers to go along with the system. Not that Irish lawyers ever needed incentives to muddy their precious silks.

I’d love to know what the ranine Minister for Enterprise, Richard Bruton does all day

He spends most of his time trying not to associate himself with this failure of a Government.

There is a desperate need for the Authority to aggressively tackle costs throughout the economy, and perhaps figuratively hang a few high profile bodies from lampposts to encourage an acceleration in reforms to competitiveness.

We need to literally hang high profile company directors and executives(and lawyers) in this country, so bad is the situation. A gallows should be erected on O’Connell Street for the purpose. It needs to be public, complete with city residents throwing fruit and jeering. Very little else will act as a real deterrent for this class of criminal.

You are absolutely right. Consider these two Parliamentary Questions to the health and justice ministers last October 2012. Are you impressed with the responses?

Deputy Pearse Doherty: To ask the Minister for Health if he will confirm the requirements to reform competition and practice in the health sector set out in the Memorandum of Understanding with the programme Troika; the dates on which such requirements are to be complied with..

Minister for Health, James Reilly : The Memorandum of Understanding agreed with the EU/IMF in December 2010 provided that the Government would introduce legislative changes to remove restrictions to trade and competition in sheltered sectors including:

– eliminating restrictions on the number of GPs qualifying and removing restrictions on GPs wishing to treat public patients as well as restrictions on advertising;

– ensuring that the elimination of the 50% mark-up paid for medicines under the State’s Drugs Payments Scheme is enforced.

The Health (Provision of General Practitioner Services) Act 2012 was enacted in February 2012 and commenced on 12 March 2012. It eliminates restrictions on fully qualified and trained GPs wishing to obtain contracts to treat public patients under the General Medical Services (GMS) contract. By the 30th September 2012, 78 GPs had been granted a GMS contract by the Health Service Executive under the provisions of the Act and in excess of 40 applications are currently being processed.

Legislation was not required in relation to the other provision of the Memorandum.

In relation to the number of GPs qualifying, the HSE and the Irish College of General Practitioners (ICGP) have reached agreement on an alternative route to specialist registration for doctors who have extensive experience in General Practice, but who lack some component of training to become eligible for specialist registration as a GP. Details of this “practice based assessment model” were published on the ICGP website in September 2011. It is anticipated that the application period for this route to membership will open in early 2013.

In relation to restrictions on advertising, until 2009, the Medical Council’s “Guide to Professional Conduct and Ethics for Registered Medical Professionals” placed advertising restrictions on new GPs. They were only allowed to advertise their arrival in an area by way of newspaper notices. Other methods of advertising, including notification of prices, were not allowed. The Medical Council’s current guidelines, published in November 2009, have removed these restrictions. GPs are now free to advertise their services and their prices.

In relation to the pharmacy profession, the 50% mark-up payable under the Drug Payment Scheme was reduced to 20% in 2009 by way of regulations made under the Financial Emergency Measures in the Public Interest Act 2009. These regulations are enforced by the HSE. No further action is required under this heading.

Deputy Pearse Doherty: To ask the Minister for Justice and Equality if he will confirm the requirements to reform competition and practice in the legal sector set out in the Memorandum of Understanding with the programme Troika, and the dates on which such requirements are to be complied with..

Minister for Justice and Equality, Alan Shatter: The Programme of the Government for National Recovery 2011-2016 undertakes to “establish independent regulation of the legal profession to improve access and competition, make legal costs more transparent and ensure adequate procedures for addressing consumer complaints”. These undertakings complement those structural reforms in the EU/IMF Programme of Financial Support for Ireland aimed at removing restrictions to trade and competition relating to the legal professions and legal costs, namely:
to establish an independent regulator for the legal professions and implement the recommendations of the Legal Costs Working Group; and
to implement the outstanding Competition Authority recommendations to reduce legal costs.
Effect is being given to these structural reform commitments in the form of the Legal Services Bill 2011 which was published, in keeping with the relevant time-line under the Troika Programme, for the end of Quarter 3 of 2011. As the Deputy will be aware, the Bill, which remains a priority under the Government Legislation Programme, completed Second Stage in the Dáil in February and is awaiting Committee Stage.

I have made comprehensive statements on the Bill and its continuing development both at the Annual Conference of the Law Society on the 14th of April and at the conference hosted by my Department on Regulatory Reform for a 21st Century Legal Professionwhich took place on 6th July. The full text of these statements is available on the Department website, http://www.justice.ie, for ease of reference. I continue to receive submissions in relation to the Bill from various stakeholders and these are being considered as part of the ongoing deliberative process in preparation for Committee Stage.

In light of this continuing work, I am confident that the Bill, when enacted, will better balance the interests of consumers of legal services and those of legal practitioners who provide them while modernising the legal costs regime in a way conducive to greater scrutiny and competitiveness. Substantial, positive progress has been made towards achieving the desired and important balance between the independence of the legal professions and the Government’s stated policy objective of independent regulation. I have made known the intended scope of the amendments to the Bill that will place the new regulatory and disciplinary architecture for the two legal professions beyond any undue interference by Minister or Government. This effectively lays to rest those concerns about impinging on the independence of the legal professions that had been initially voiced in relation to the Bill and its motivation.

As the Bill approaches Committee Stage it has reached a point where it is set to provide for an independent Legal Services Regulatory Authority, an independent complaints framework and an independent Legal Practitioners’ Disciplinary Tribunal. These are being buttressed by the functions and powers of a modernised Office of the Legal Costs Adjudicator, with the support of transparent Legal Costs Principles and procedures. The Bill will also open the legal services sector to the future and its new business models and technologies in a way that will benefit the legal professions as much as it will enhance the position of their clients.

Work on the details of the proposed amendments to the Bill is, therefore, ongoing at my Department including in conjunction with the Offices of the Attorney General and of Parliamentary Counsel and the EU/IMF/ECB Troika. As I have previously stated, the relevant amendments will be made available in advance of Committee Stage along with the relevant Regulatory Impact Analysis. It remains my objective, notwithstanding the competing legislative demands of our EU/IMF/ECB Programme commitments – notably the Personal Insolvency Bill which continues to occupy Members of both Houses – that Committee Stage of the Legal Services Regulation Bill should commence as soon as possible, preferably before the end of this year.

Thank you for these PQs, which are informative. As you can see, reforms in the medical area are more advanced than those in the law, and the GPs/public patients reform is a big one. Note that the doctor in Leonard’s Corner that I walk past daily has a sign in the window saying 35 euro for a consultation, so competition does seem to be working here. And – this is not pedantic – I hope you realise that the GP and hospitals in the UK are not “free” but paid out of general taxation. Families in Ireland on average wages pay very little income taxes compared to other European countries, so user fees for services are necessarily higher. In fact, as I have said before, increasing income taxes significantly on the 20-30,000 a year income group is an important part of getting out of our current difficulties, and may allow us to move to “free” healthcare as well.

The other side of things – whether appointment of receivers, or lawyers, or drug costs – mostly comes under the public sector procurement banner, where we need systems to induce lower bids and competition between providers in services for the government. Lots of work to be done there I am sure.

And on retail competition, of course the wildly high minimum wage, a disgrace with such high unemployment, does need to be reduced.

We need to get all supermarkets over a certain size to feed all prices in to a database. No reason it can’t be done, they do it in the uk http://www.mysupermarket.co.uk. We just need to force them. Apparently we’re considered ‘Treasure island’ by Tesco.

Taking Eurostat data for 2011, and comparing Ireland with Germany, using 100 as the EU27 average.

GDP-per-capita: Irl is still ahead (though falling) at 129, while Germany’s position has improved to 121.

AIC-per-capita: Actual Individual Consumption is a better measure of living standards, according to Eurostat. Here, Irl drops to 101, highlighting the effect of MNC/FDI on the GDP figures. Germany is at 120.

Price levels: Irl = 119, Germany = 102

So we pay 16.6% or one-sixth more for goods and services than the Germans, although our real consumption levels is one-sixth less.